CRM
1. What kind of banks they are? What services do they provide?
SBI HDFC HSBC
Ownership Public Private Multinational
Extensive rural and semi- Focus on urban and affluent
Retail Banking Premium, international focus
urban reach customers
Corporate Large-scale Indian Wide range of corporate Multinational corporations,
Banking corporations, SMEs services, strong SME focus trade finance
Agricultural Specialized products for
Limited agricultural products Not a primary focus
Banking farmers
Wealth Comprehensive wealth High-end personalized
Basic investment products
Management management services
Leading in digital innovation, Advanced solutions, HSBCnet
Digital Banking Strong digital push with YONO
PayZapp for businesses
Insurance and Broad offerings with partners Wide range of insurance and Comprehensive global
Mutual Funds like Amundi mutual funds services
International Limited international Extensive cross-border and
Some international services
Banking presence global reach
1. What are their sources of income and expenses.
SBI HDFC HSBC
Majorly from retail and Majorly from retail and SME Significant portion from global
Interest Income
agricultural loans loans corporate loans
Fee and Higher fees from urban High fees from wealth
Significant from remittances,
Commission customers, tech-driven management and investment
rural banking
Income services banking
Moderate, focused on Active in securities and forex Substantial from global
Trading Income
securities and forex trading markets, forex, and trading
Operating Higher due to large number of Efficient due to technology High due to global operations
Expenses branches and employees and urban focus and compliance
Provisioning for Higher due to larger exposure Lower NPAs due to stringent Provisions influenced by
Bad Debts to NPAs credit policies global exposure and risks
2. How to do they make money ?
SBI HDFC HSBC
Major focus, global
Retail Banking Major focus, India-centric Major focus, India-centric
presence
Corporate/Commercial Global reach, diverse
Strong presence in India Strong presence in India
Banking services
Moderate focus, India- Significant focus,
Wealth Management Growing focus, India-centric
centric international
Investment Banking Limited scope Limited scope Extensive global operations
Through subsidiaries, India- Through subsidiaries, India- Broad range of products
Insurance
centric centric globally
Significant focus, India-
Rural Banking Minimal focus Minimal focus
centric
Moderate focus, India- Strong focus, diverse Strong focus, diverse
Fee-Based Services
centric offerings offerings
Similarities in Revenue Models
a. Retail Banking: All three of these banks put a strong emphasis on their retail banking segments and maintain a
wide array of services in the world of personal banking, from simple products such as savings accounts and loans
to credit cards and mortgages.
b. Corporate/Commercial Banking: Almost every bank has a plethora of services ranging from providing loans,
trade finance, and even cash management for corporate customers.
c. Treasury Operations: Treasury operations in all the three banks seem to be a major revenue contributor. This
constitutes investments, forex, and trading activities.
d. Insurance: All three banks sell both life and general insurance products.
3. Insights on comparison on asset, liabilities, income and expenses of three banks.
1. Assets
a. Cash and Bank Balances: HDFC and SBI's cash and bank balances hover around 4.75% and 4.48%, respectively,
while HSBC's is nearly double at 9.41%. HSBC keeps way more cash and balances than SBI and HDFC. As a
global bank, HSBC needs to stay super liquid. Its worldwide business and varied risks make this a must. Quick
cash helps HSBC pay bills fast and grab chances in different markets. This shows HSBC cares about staying
steady and flexible across the globe. SBI and HDFC don't need as much ready money. They work in India's banking
world, which doesn't change much and has lots of rules. So, they keep their cash at normal levels.
b. Investments: A public sector bank like SBI has its investments as a high proportion of assets, reflecting its
concern for steady returns and a very 'managed' risk through diversification, given its role in supporting public
financial stability and development. HDFC is a private bank and has a considerable but lower investment
proportion when compared with SBI; their approach is a balanced one as between investments and advances,
with a view to optimizing returns, given the constraint of `managed' risk. HSBC, an international bank, has a
greater investment ratio than HDFC but less when matched against SBI. This reflects its strategy to leverage global
investment opportunities while balancing liquidity needs and diverse international risks.
c. Advances: HDFC has the largest asset proportion in advance and has been restructuring its books to have a
strong lending activity to generate higher interest income. While this aggressive lending stance serves its vast
customer base and the concomitant growth objectives, it enhances credit risk. Public bank SBI has held a
substantial but lower proportion of advances compared to that of HDFC. Its strategy spans substantial lending
with a robust investment portfolio, reflecting its role in supporting public financial stability and diverse customer
needs across India. HSBC has relatively more moderate proportions of advances compared to global banks. This
may be because it has an asset allocation strategy that is far more diversified or has conservative lending to
balance global operations, regulations, and risk management across multipronged international markets and
customers.
d. Other Assets: Compared to HDFC and HSBC, more of the assets in SBI are towards other assets. This arises
because it has a broad mandate to support diverse needs, especially in the rural and semi-urban areas, which
calls for investments in varied infrastructure and community-oriented projects. Now, in the case of HDFC, a
private Indian bank focusing on urban and affluent customers, a less proportionate participation of other assets
could be seen in respect to more focus on lending and investment products directly targeting its demography. On
the other hand, HSBC has positioned itself as a global multinational bank, proportionately maintaining an amount
of other assets between SBI and HDFC. This allocation caters to its premier international clients and international
companies that require investments in global operations, technology, and compliance to navigate complex
international financial needs and multifaceted regulatory environments.
2. Liabilities
a. Deposits: Being Indian banks, SBI and HDFC have high reliance on deposits, pointing to a strong retail banking
presence within different customer segments: rural or semi-urban for SBI and urban or affluent for HDFC. In
contrast, HSBC has lower reliance on deposits in the search for diversified funding sources with wholesale and
market-based origins. This approach serves global operations that have a dominant orientation toward premium
clients from among international customers and multinational corporations, which also yield additional income
from a variety of fee-based and international business activities.
b. Borrowings: While all three banks use borrowings to some degree, the extent and purpose likely varies based on
their ownership structure, customer segments, and geographic footprint. SBI and HDFC, as Indian banks, likely
have more localized borrowing needs compared to the global scale of HSBC's operations.
c. Other Liabilities: On the other hand, being characteristic of any other Indian banks, SBI and HDFC Bank keep track
of liabilities that include payables and financial liabilities. Being a multinational bank in terms of geographical
spread and widespread financial services, HSBC still maintains a complicated liability structure. The bank's
strategy has been to serve premium international customers and multinational corporations.
3. Income: State Bank of India (SBI) and HDFC Bank primarily generate income from interest earned on
advances and other interest-bearing assets, highlighting their traditional banking income model. In
contrast, HSBC derives income not only from interest but also significantly from fee income and
trading activities, showcasing a diversified income profile due to its global operations and
comprehensive financial services.
4. Expenses: State Bank of India (SBI) and HDFC Bank incur significant expenses in interest
payments, reflecting their reliance on interest-earning assets. HDFC also emphasizes efficient cost
management in operating expenses, while SBI shows similar efficiency. HSBC faces high operating
costs, driven by employee compensation and administrative expenses, reflecting the complexities
of managing a global multinational bank.
Conclusion:
• SBI: Deep attributed focus on traditional banking with high-volume advances and investments, significant
dependence on deposits, and substantial interest income.
• HDFC: Emphasis is on lending activities with highest proportion of advances, robust deposit base, along
with efficient expense management coupled with high profitability.
• HSBC: Differentiated Global Operations: Balanced asset structure, diversified income streams, larger
operational complexity, big operating expenses, but strongly profitable because of its size.
5. What differences you found in public vs private firms.
a. SBI is an Indian public sector bank hence, it still has a high dependence on interest income from
its loan portfolio, which gives its orientation towards traditional banking. HDFC is an Indian
private sector bank with an earning profile that is more diversified—the fees and services-based
one. HSBC is an international bank with fee-based income, financial instruments, and financial
services that stretch the definition of traditional banking geographically, besides and across
countries worldwide. While SBI serves as the representative of the public sector and HDFC
represents the private sector in India, prima facie, the difference between their income
structure is based on the nature and business model linked with ownership. HSBC has the most
diversified sources of income among the three concerned banks because of its global
operations.
b. The Indian public sector bank, SBI, has high operating expenses, which can be attributed to a large
workforce and an extensive branch network along with high interest expenditure, the latter driven by
deposit mobilization. HDFC is an Indian private sector bank that has lower operating expenses in relation
to its income, a reflection of efficient cost management, and lower interest expenditure, which testifies to
effective liability cost control. HSBC, being a multinational bank, has to incur high costs on employee
compensation across various countries, and also the financial instruments and associated derivatives
involve large amounts of money, reflecting the complexity of its operations across the globe.
c. In India, SBI is a public sector bank whose profit margins are low and earnings per share are only fair, as
heavy operating costs and government obligations weigh on the bottom line HDFC is an Indian private
sector bank to post excellent profit margins and strong earnings per share, fueled by good operational
efficiency and tight cost control measures. Havings operations in that multinational bank, HSBC, enable
it to drive home strong profitability out of various worldwide activities, from trading and insurance to
strong earnings per share performance across international markets.
d. SBI is a public sector bank that depends more on customer deposits, with lower reserves and surplus vis-
à-vis private banks, reflecting its wide retail base and ownership by the government. Being a private
sector bank, HDFC has higher reserves and surplus, depicting robust retained earnings and efficient
capital management through balanced use of borrowings and deposits. HSBC can maintain an inclusive
diversified liability structure of customer accounts and other financial instruments with a strong equity
proportion, depicting its strong capital base and ensuring its financial stability for every country where it
has geographical existence.
e. SBI, being a public sector bank, relies more on lending activities with major assets accrued to advances,
along with significant investments in a balanced approach. HDFC maintains more aggressive lending
strategies as it is a private sector bank. Its higher proportion of assets in advances and significant
investments reflects diversified management of its assets. An international bank, HSBC maintains a
diversified asset base based on huge investments in financial instruments and trading assets, just simply
indicating that, in essence, it has a wider value of its financial activities with a lower proportion of these
dedicated to loans and advances.
f. Generally, private banks like HDFC are more operationally efficient and profitable compared to public
banks like SBI. This naturally follows from the fact that they have stringent cost management policies and
an efficient way to funnel these resources. Besides, private banks usually diversify both their sources of
income and assets to a greater extent, thereby being better insulated against sectorial risks. In contrast,
international banks like HSBC are very income- and asset-class diversified, minimizing the vulnerability to
economic fluctuations and sectoral-specific challenges. While their complex financial activities require
strong risk management frameworks to be put in place, the potential risks will likely be mitigated
effectively.
6. What differences you observed in India vs US/Chinese banks. How their balance sheet and statement of
income differs?
The Indian banks, namely SBI and HDFC Bank, use approximately 60-70% of their assets for loans and
advances, while HSBC only allots about 35%. HSBC holds a much greater investment portfolio at
around 15% of its assets compared to the Indian banks, which are around 25-30%. Cash with central
banks is held by HSBC at about 10% of its assets as opposed to the Indian banks at about 3-5%.
Deposits have a greater contribution to total liabilities, around 75-80%, in the case of Indian banks,
while this percentage is merely 55% or so for [Link], on the other hand, relies more on
borrowings—around 20-25% of its liabilities—than Indian banks, which have borrowings contributing
about 10-15% of their liabilities.
About 60-70% of the operating income of Indian banks comes from net interest, while for HSBC, net
interest income constitutes about 55%. HSBC generates a larger share of its income from non-interest
sources, comprising primarily financial instruments, insurance, and fees.
Most Indian banks therefore show higher net profit margins in the range of 15-20%, as compared with
HSBC's margins coming in at around 5%. HSBC spends more on operations as a percentage of its
income, coming in at about 60-65%, whereas Indian banks come in at about 40-50%.
These distinctions illustrate how Indian banks emphasize loans and deposits, while HSBC leans
towards investments and a diversified income stream. Indian banks also typically exhibit higher
profitability, reflecting their operational focus and market conditions compared to HSBC's broader
operational model and market dynamics.
Submitted by:
Shashwat Agrawal
230101186